Freak trades in F&O after the removal of execution range

The removal of execution range for FO trades has led to a rise in the number of complaints for freak trades. Here is a summary and what you can do to avoid these:


What if I had no stop loss, instead say I shorted 16450 ce intraday and tracking nifty constantly. Since there is no freaky move in Nifty, I’m chill. However, my unrealized loss at some instant (during freak trade) would be high (say, higher than my account value). Will zerodha (or any broker) automatically close the position?

As these happen for milli-seconds, my short positions will be fine because the premium will come back to its original price. However if zerodha close my position, I’m at loss.


@siva If the SLM order is placed, would that be canceled as well at the time of trigger depending on bid-ask and the impact cost?


Zerodha won’t close, not sure about other brokers.


No, our internal ranges will be only for normal market orders.


"However, we have come up with a solution where market orders for index F&O with an impact cost more than a certain percentage of the last traded price will be disallowed. To calculate this impact cost, the system will consider the best five bids and offers and the quantities available at those prices while placing the order. If the impact cost from that market order is more than a certain percentage, the order form will reject the order and nudge you to place a limit order.

The plan is to have this percentage based on the premium value, 20% if the premium is above Rs 50, 20% to 40% for premiums between Rs 10 to Rs 50, 50% or more for premiums less than Rs 10."

@Siva, suppose LTP is 5, then this means that the system won’t allow sell market order to be filled if the price is 2.5 or below? And won’t allow us to buy if the price is 7.5 or above?
Am I understanding this correctly?

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Is there an article mentioning how zerodha receive these ticks. I heard brokers receive ticks every second (like 09:15:01. 09:15:02 and so on), and not the many ticks happened between second (in milli-seconds).

Also how does zerodha auto square-off system works if the loss is heavy compared to account value?

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sir why this cannot be for SL…it will solve many problems

so will sl hit if freak trade is opposite my existing open position and slippage be very high ??

The way freak trade happens putting SL-market order is like committing suicide. So if I have to put SL-limit order, how much gap should be placed in the system between trigger&limit price trading at BNO atm CE/PE ?

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Does this even solve anything?? Really does it. Everyone knows traders use sl-m orders to place at strategic points in order to catch a trend or exit a loosing position, you guys are saying that is not covered by the internal range, so basically the trader must keep waiting for the range to come and than manually try to enter the order everytime that happens, do you guys really think market gives that much time that a trader will get to manually place each order, also asking to use sl-limit is like saying some will get filled some will not just take that chance.


Zerodha won’t sqoff position because of these freak trades.

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It can, if freak trade happens all sl orders in system will be cleaned, so better use sl limit instead sl market to have less slippage in case freak trade happen.

There is no correct answer for this, can be anything, but try keeping at least 20 points away in banknifty, said that there is no guarantee of this getting executed but the chances of execution will increase with more gap.


Do you have any better suggestion? please let us know, if possible we will try to implement from our end.

Yes Siva the suggestion is to talk to SEBI and get them to remove margin rules and get them to bring back the execution range. Who else do we look upto to raise our concerns.

SL orders will sit at exchange after passing all RMS checks from brokers, once it is in the system nothing can be done from our end.

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Say, Zerodha’s code would detect that the unrealized loss is way to much compared to the account value. Why won’t they close the position in such case? How would their existing code know it’s a freak trade.

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It goes off for a second by the time we get alert, it will be normal and as it is not fully automatic, but semi, this is okay.